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DAX — Promising Pattern Continues to Build After False Breaks. Short Term Strategies, Scalping, Price Action Analysis, and Risk Management. Creating a Forex trading strategy does not have to be a difficult process. Today we will review a simple scalping strategy using the Stochastics indicator. Traders who are looking to peruse Scalping opportunities in the Forex market will benefit from having a completed trading strategy at their disposal.
The number of variables that can be added to a strategy are limitless, and it is often good to have a simple strategy on standby. Today we are going to review a simple stochastic strategy that can be used for scalping trending Forex currency pairs.
The first step to trading any successful trend based strategy is to locate the trend! The period MVA Simple Moving Average is one of the markets most used tools for this purpose. Traders can add this indicator to any graph and identify whether price is above or below the average. If price is above the MVA traders can assume the trend is up and look to buy. Below we can see a 5minute AUDJPY chart accompanied with the period MVA.
Given the information above, traders should look to buy the AUD JPY as long as it remains trending higher. If the best continues, expectations are that price will remain above the period MVA and new highs will be created. Once a trend is spotted using the period MVA, and a trading best has been established, traders will begin looking for a technical trigger to enter into the market. Oscillators are common choices, and SSD slow stochastics can be forex to your graph for this exact strategies.
Below we can see the AUDJPY 5minute graph, this time with SSD added. Since we have identified the AUDJPY in an uptrend traders will look to buy when SSD signals momentum returning back in the direction of the trend. Note how only buy positions are to be taken on bullish crossovers as the uptrend continues. At best point should traders consider selling as the uptrend continues.
As with any forex market strategy, scalping Forex trends carries risk. It is important to know upfront that trends eventually do end. Scalpers can use a swing low or even the period MVA as places to set stop orders.
In the event that price breaks and begins creating lower lows, traders will wish to exit any existing long positions and look for other opportunities. To contact Walker, email wengland DailyFX. Follow me on Twitter WEnglandFX. Interested in learning more about Forex trading and strategy development? Register here to continue your Forex learning now! DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
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